LIVERMORE, Calif., Aug. 04, 2016 (GLOBE NEWSWIRE) -- Performant Financial Corporation (Nasdaq:PFMT), a leading provider of technology-enabled recovery and related analytics services in the United States, today reported the following financial results for its second quarter ended June 30, 2016:

Second Quarter Financial Highlights

Total revenues of $38.1 million, compared to revenues of $41.3 million in the prior year period, down 8%

Net income of $1.5 million, or $0.03 per diluted share, compared to a net income of $0.7 million, or $0.01 per diluted share, in the prior year period

Adjusted EBITDA of $8.9 million, compared to adjusted EBITDA of $8.4 million in the prior year period

Adjusted net income of $2.9 million, or $0.06 per diluted share, compared to an adjusted net income of $2.3 million or $0.05 per diluted share in the prior year period

Second Quarter 2016 Results

"Our strong results in the second quarter and year to date are a reflection of our improved employee productivity and our ongoing focus on expense control. We are committed to maintaining a strong financial platform from which we can quickly transition if we are successful in obtaining new contract awards from the Department of Education and the Centers for Medicare and Medicaid," said Lisa Im, Performant Financial's Chief Executive Officer.

Student lending revenues in the second quarter were $28.8 million, a decrease of 7.0% from $31.0 million in the prior year period. The U.S. Department of Education and Guaranty Agencies accounted for revenues of $7.0 million and $21.8 million, respectively, in the second quarter of 2016, compared to $10.5 million and $20.5 million in the prior year period. Student loan placement volume (defined below) during the quarter totaled $1.3 billion, compared to $1.7 billion in the prior year period. This figure reflects the lack of placements from the Department of Education and a 24% increase in placement volume from Guaranty Agencies compared to the second quarter of 2015.

Healthcare revenues in the second quarter were $3.4 million, down from $5.3 million in the prior year period, as the Company's healthcare revenues continue to be adversely affected by significant limitations on the scope of recovery activities that have been imposed during the Centers for Medicare and Medicaid Services ("CMS") contract transition. Medicare audit recovery revenues were $2.3 million in the second quarter, a decline of $0.7 million from the prior year period. Commercial healthcare clients contributed revenues of $1.1 million, a decrease of $1.1 million from the prior year period.

Other revenues in the second quarter were $5.9 million, up from $5.1 million in the prior year period.

As of June 30, 2016, the Company had cash and cash equivalents of approximately $53.2 million.

Business Outlook

"As we look to the back half of this year, we anticipate some softening as revenues will not be as high as the first six months. However, based on our strong year-to-date results, we are updating our 2016 revenue and adjusted EBITDA expectations to $135 million to $145 million and $18 million to $22 million, from $125 million to $135 million and $14 million to $18 million respectively," concluded Im.

Terms used in this Press Release

Student Loan Placement Volume refers to the dollar volume of defaulted student loans first placed with us during the specified period by public and private clients for recovery. Placement Volume allows us to measure and track trends in the amount of inventory our clients in the student lending market are placing with us during any period. The revenue associated with the recovery of a portion of these loans may be recognized in subsequent accounting periods, which assists management in estimating future revenues and in allocating resources necessary to address current Placement Volumes.

Earnings Conference Call

The Company will hold a conference call to discuss its second quarter results today at 5:00 p.m. Eastern. A live webcast of the call may be accessed on the Investor Relations section of the Company's website at investors.performantcorp.com. The conference call is also available by dialing 855-327-6837 (domestic) or 778-327-3988 (international).

A replay of the call will be available on the Company's website or by dialing 877-870-5176 (domestic) or 858-384-5517 (international) and entering the passcode 10001441. The telephonic replay will be available approximately three hours after the call, through August 11, 2016.

About Performant Financial Corporation

Performant helps government and commercial organizations enhance revenue and contain costs by preventing, identifying and recovering waste, improper payments and defaulted assets. Performant is a leading provider of these services in several industries, including healthcare, student loans and government. Performant has been providing recovery audit services for more than nine years to both commercial and government clients, including serving as a Recovery Auditor for the Centers for Medicare and Medicaid Services.

Powered by a proprietary analytic platform and workflow technology, Performant also provides professional services related to the recovery effort, including reporting capabilities, support services, customer care and stakeholder training programs meant to mitigate future instances of improper payments. Founded in 1976, Performant is headquartered in Livermore, California.

Note Regarding Use of Non-GAAP Financial Measures

In this press release, to supplement our consolidated financial statements, the company presents adjusted EBITDA and adjusted net income. These measures are not in accordance with generally accepted accounting principles (GAAP) and accordingly reconciliations of adjusted EBITDA and adjusted net income to net income determined in accordance with GAAP are included in the "Reconciliation of Non-GAAP Results" table at the end of this press release. We have included adjusted EBITDA and adjusted net income in this press release because they are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends and to prepare and approve our annual budget. Accordingly, we believe that adjusted EBITDA and adjusted net income provide useful information to investors and analysts in understanding and evaluating our operating results in the same manner as our management and board of directors. Our use of adjusted EBITDA and adjusted net income has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In particular, many of the adjustments to our GAAP financial measures reflect the exclusion of items, specifically interest, tax and depreciation and amortization expenses, equity-based compensation expense and certain other non-operating expenses, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be calculated differently from similarly titled non-GAAP financial measures used by other companies, limiting their usefulness for comparison purposes.

Forward Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our financial guidance for 2016 and our opportunity to obtain new recovery contract awards from the Department of Education and CMS. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, that our agreements with CMS and the Department of Education, two of our largest customers, are currently subject to rebidding processes, that transition rules have significantly limited our activity under the existing Medicare Recovery Audit Contractor ("RAC") contract, the high level of revenue concentration among the Company's five largest customers, that many of the Company's customer contracts are subject to periodic renewal, are not exclusive and do not provide for committed business volumes, that the Company faces significant competition in all of its markets, that the U.S. federal government accounts for a significant portion of the Company's revenues, that future legislative and regulatory changes may have significant effects on the Company's business, failure of the Company's or third parties' operating systems and technology infrastructure could disrupt the operation of the Company's business and the threat of breach of the Company's security measures or failure or unauthorized access to confidential data that the Company possesses. More information on potential factors that could affect the Company's financial condition and operating results is included from time to time in the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of the Company's annual report on Form 10-K for the year ended December 31, 2015 and subsequently filed reports on Forms 10-Q and 8-K. The forward-looking statements are made as of the date of this press release and the Company does not undertake to update any forward-looking statements to conform these statements to actual results or revised expectations.

(1) Represents direct and incremental costs associated with expenses incurred in 2015 for a potential acquisition and related financing.(2) Represents amortization of capitalized expenses related to the acquisition of Performant by an affiliate of Parthenon Capital Partners in 2004, and also an acquisition in the first quarter of 2012 to enhance our analytics capabilities.(3) Represents amortization of capitalized financing costs related to financing conducted in 2012 and costs related to the amendment of the terms of the note payable in 2014 and 2016.(4) Represents restructuring costs and severance and termination expenses incurred in connection with termination of employees and consultants.(5) Represents tax adjustments assuming a marginal tax rate of 40%.

PERFORMANT FINANCIAL CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Results

(In thousands, except per share amount)

(Unaudited)

We are providing the following preliminary estimates of our financial results for the year ended December 31, 2016:

Six Months Ended

Year Ended

June 30, 2016

December 31, 2016

December 31, 2015

December 31, 2016

Actual

Estimate

Actual

Estimate

Adjusted EBITDA:

Net income (loss)

$

1,557

$ (6,540) to (4,670)

$

(1,795

)

$ (4,983) to (3,113)

Provision for (benefit from) income taxes

1,036

(4,036) to (2,906)

(386

)

(3,000) to (1,870)

Gain on Sale of Land (6)

—

—

(636

)

—

Interest expense

4,273

3,427 to 3,727

8,889

7,700 to 8,000

Transaction expenses (1)

—

—

3,270

—

Restructuring and other expenses (4)

283

—

1,079

283

Depreciation and amortization

6,806

6,494 to 6,994

13,368

13,300 to 13,800

Stock-based compensation

2,340

2,360 to 2,560

5,009

4,700 to 4,900

Adjusted EBITDA

$

16,295

$ 1,705 to 5,705

$

28,798

$ 18,000 to 22,000

(1) Represents direct and incremental costs associated with expenses incurred in 2015 for a potential acquisition and related financing.(4) Represents restructuring costs and severance and termination expenses incurred in connection with termination of employees and consultants.(6) Represents gain on the sale of land in San Angelo, TX in 2015.